China’s Geely beats estimates, snapping four-year profit decline

GEELY Automobile Holdings, the centrepiece of billionaire Li Shufu’s car empire, posted earnings that beat estimates after reversing a four-year slide in margins.

Net income rose 9 per cent to 5.26 billion yuan (S$1.02 billion) in the 12 months ended Dec 31 from the year before, the company said in a statement on Tuesday (Mar 21). That compared with analyst estimates of 4.85 billion yuan, according to data compiled by Bloomberg. Revenue climbed 46 per cent to 147.96 billion yuan.

“During the year, the group sharpened the operational focus on new-energy transformation and significantly accelerated the pace towards this end,” the company said in the statement. “The sales volume of new-energy vehicles sold by the group’s two 50 per cent owned joint ventures increased drastically,” it added.

While revenue climbed, the surging costs of batteries, chips and other components, as well as investment into Zeekr — the firm’s new electric vehicle (EV) brand — put pressure on profitability. New energy vehicles, which are accounting for a bigger proportion of the company’s lineup, also have lower margins than petrol cars. All up, the automaker’s gross margin fell 3 percentage points last year to 14.1 per cent, it said.

The company set a sales target of 1.65 million units for 2023, up 15 per cent from last year. Areas where it sees new opportunities include autonomous driving and exports, and it will continue to leverage its relationships with partners such as France’s Renault to promote overseas development, the statement said.

The Hangzhou-headquartered company’s export rose 72 per cent last year to just over 198,000 units. Sales in China, which accounts for the majority of Geely’s revenue, rose just 2 per cent to 1.23 million vehicles.

Geely is playing catch up in electric cars, the fastest-growing segment in China’s auto industry. While the firm’s EV sales surged 300 per cent last year from 2021, they totalled just 82,100. That’s a fraction of the 1.86 million EVs, including plug-in hybrids, sold by market leader BYD which has stopped making petrol-powered cars.

China’s domestic market is also increasingly challenging — car sales fell in the first two months of this year from a year earlier and automakers are caught in a price war.

Geely is now leveraging resources from the empire built by Li to catch up. Its high-end EV line, Zeekr, launched in 2021, shares a design team based in Gothenburg with Volvo, majority owned by Geely. Zeekr sold a healthy 71,000 units in 2022, and the carmaker is launching more models and doubling Zeekr’s sales target to 140,000 this year.

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Li is one of the top shareholders of Mercedes-Benz Group and Aston Martin Lagonda Global Holdings, while Geely has two joint venture projects with France’s Renault.

The Hanghzou-headquartered company also launched another EV product line under the Geely brand called Galaxy in February, which will roll out seven plug-in hybrids and battery EVs over the next two years. BLOOMBERG